You're viewing posts tagged; "Economy, City & rates"

21 September 2013 12:59 PM

What a week for the 'recovery'. British productivity figures for 2011-2012 showed the widest gap between ourselves and the rest of the Group of Seven rich nations in 18 years, and showed also that we actually produced two per cent less in 2012 than in 2007.

Meanwhile, retail sales followed a strong July with a weak August, reinforcing the impression that recovery, 2013-style, involves one step forward and most a step back again.

Across the Atlantic, the Federal Reserve Board came to the view that America's own recovery was still a poor, fragile thing and decided, after all, not to begin immediately winding down its colossal money-creation programme under which about $3 trillion has been conjured into existence and pumped into the economy, making our own £375 billion scheme look small beer.

Markets jumped for joy at the news that their favourite fun drug was still on offer, courtesy of the Fed's Dr Feelgood, Ben Bernanke.

There was, however, one bright spot, with the news that the Coalition is to spend £600 million of the money we are supposed not to have extending free school meals to all infants, including the ones whose parents need no such subsidy. This widely-ridiculed announcement came from Nick Clegg at his party conference - more than most British politicians, he uses children as human shields when any sort of difficulty raises its head, in his case the Liberal Democrats' truly appalling poll numbers.

As I have written (maybe too often) before, the critical question is whether we are living through another 1933 or 1973. If the former, then thanks to unconventional monetary policy (leaving the Gold Standard) a recovery is under way, slowly but surely. If the latter, then thanks to unconventional monetary policy (the breakdown of fixed exchange rates and a massive monetary stimulus) an inflationary blow-out and a much deeper crisis awaits us.

1) Yesterday once more?

Self-interest attracts me to the 1933 answer, my instinct towards 1973. Allister Heath, editor of City AM, looks to me like a '73-er.His excellent leader on Thursday morning mocked the 'brave new world' in which 'bad news is good news' because it gives central banks such as the Fed an excuse to keep 'monetary methadone flowing freely'.

Twenty-four hours later, Allister was less sure footed on matters pertaining to the early Seventies, with a leader bemoaning Britain's failure 40-odd years ago to build the third London airport at Maplin Sands. The project, also known as Foulness, was truly gigantic in its scale. To be fair, Allister acknowledges this - and heartily approves.

Others did not. Here is Christopher Booker:

'[T]he Maplin scheme [was] far more ambitious than almost anyone realised at the time, involving as it did not just the building of a new, third London Airport on the Essex marshes, but the biggest land reclamation scheme the world had ever seen, the building of a new city for 250,000 people, a new port equal in size to Rotterdam, the largest in Europe, not to mention the two vast swathes of destruction that would have been involved in driving special new motorways and rail links into the heart of London, across some of the most densely populated country in Britain.'

(The Seventies: Portrait of a Decade; Allen Lane; 1980)

Labour returned to power in 1974 and its Environment Secretary Anthony Crosland cancelled the whole scheme, which he had dubbed 'Heathograd', after the now-ousted Prime Minister.

2) What goes round

From 1944 to 1976, economic policy was guided, in part at least, by the goal of full employment. That was the target.

In my voting lifetime, during much of which I have been a financial or economics journalist, we have had a number of substitute targets: domestic credit expansion (an early Labour version of money-supply targets), a target for 'broad money' (Sterling M3), which includes notes, coins and bank deposits, a target for 'narrow money' (Sterling M0), including just notes and coins, tying ourselves to the European Exchange-rate Mechanism (with success or failure gauged by the 'ERM divergence indicator'),then inflation targeting and now, under the new Bank of England Governor Mark Carney, one of the targets is to be...employment.

Over the summer, Mr Carney announced that he would not think of tightening monetary policy until unemployment fell to at least seven per cent of the available workforce. The rate was then about eight per cent.

The Governor seemed to think the employment target would not be met until 2015-2016. But since then, the rate has fallen more rapidly than expected. Mr Carney hurried to a gathering of business folk in Nottingham to explain that seven per cent was not some sort of automatic trigger for tighter policy. Er, so what is it then?

I fear that, however unworthy, the suspicion is taking root that the Governor may have chosen the target to fit his preferred policy rather than vise versa. If so, it probably won't be the first time this has happened in the UK.

3) Mis-spoken

I am putting together a list of words and phrases with very specific meanings that are routinely used incorrectly simply because they sound like a grander version of something else.

'Contingent liability' is one such. It is used as a wordier version of 'liability', i.e. to describe a position in which someone is liable to do something or pay someone. A liability, in other words, that has been established.

But a 'contingent liability' will become established only if something else happens. It is upon this 'something else' that it is contingent.

Here's another: 'deadweight cost'. Again, this is used as a ten-guinea version of the bog-standard 'cost', as in: 'Layers of middle management represent a deadweight cost for British businesses.' Deadweight cost is just a heavier and more burdensome cost.

Except that it isn't

A deadweight cost is a specific economic expression, best illustrated by imagining that you visit your local butcher and are told that 2lbs of corner cut is being sold at half price, £6 instead of £12. Imagine the butcher's delight when you respond to this brilliant piece of marketing by ordering 2lbs of corner cut!

What the butcher does not know is that it was this joint that you had come to the shop to buy - at the old price. The deadweight cost of the transaction for the butcher is £6.

How about 'cross-infection', now bandied around as a double-barreled way of saying 'infection'? Its proper use relates to hospitals and other places of medical care, in which one patient is infected by another.

Any other examples gratefully received.

4) Raising a glass to Classless

MY review of A Classless Society: Britain in the 1990s, by Alwyn W. Turner has now been published by Lobster magazine. The link is

BACK in the Eighties and early Nineties, colleagues and I used to predict that, in the event of shock election victory for the Monster Raving Loony Party, it would take about one week before Screaming Lord Sutch and Tarquin Biscuitbarrel would appear in dark suits explaning the need for a tough public spending round and a credible anti-inflation policy.

Such is the sinuous ability of the British establishment to turn wild men into conformists.

Now it is the turn of Nigel Farage and his UK Independence Party. Remember UKIP? It was the outfit that was no way going to bow down to political correctness. No sir.

Now we find out that some joker called Godfrey Bloom MEP has had the whip withdrawn for making stupid and disobliging remarks to some female activists. This, apparently, is now a hanging offence in UKIP, just as in all the other parties.

Welcome to the political class, Nigel.

PPS: This is now my new site. Thanks again for your patience while it was being set up. I hope you enjoy the weekend.

dan.atkinson@live.co.uk

Going South: Why Britain Will Have A Third World Economy By 2014, by Larry Elliott and Dan Atkinson is published by Palgrave Macmillan

This may be pressed on some - those forced back to work by a financial crisis that has derailed the savings plans of millions - and feel deeply unfair.

But older working is a trend that will boost Britain’s overall prosperity. The UK has a huge demographic bulge of those aged 45 to 66. The impact of these post-war baby boomers retiring – spending less and paying less tax – will impede the economy for another decade [more on this].

Anything that helps dissipate that demographic tsunami should be embraced.

And in any case, why wouldn’t the government want to harness the workplace wisdom and decades of experience built up by older workers?

But isn’t this older generation stealing jobs from the young? This, economists say, is the 'the lump of labour fallacy' – the belief that there is a fixed number of jobs in the economy. In reality, the economy expands, broadly, with the size of the workforce – one of the reasons for political acceptance of immigration.

Jeffrey Zax, an economics professor at the University of Colarado, has a pithy explanation. 'No one within the field of economics believes that, but it's a perpetual myth that we've never succeeded in killing as we would like to,' he told Reuters.

'Work comes from the ability to do something useful, and there is no fixed limit on how many useful things can be done,' he added. 'History shows we are always thinking of new things to do that are useful. So what determines how much work is possible is how much useful work there is to do.'

He said: 'Businesses and jobs come and go. None of us want to experience that personally because of the uncertainty, but the economy is always creating new opportunities.'

Research by the over-50s organisation Saga shows 70% of its members want to carry on working part-time beyond their official retirement date and not just for the money, but for 'work satisfaction, feeling useful and the social benefits'.

16 May 2012 4:39 PM

As forecasts hit fever pitch of Greece being bundled out of the euro, there was bound to be plenty of wild speculation – and a snippet doing the rounds is that holidaymakers should be worried about holding Greek euro notes.

Travel firm DialaFlight even posted a blog, swiftly removed, making some fairly bold claims about whether Greek euro notes would prove worthless if the troubled nation fell out of the currency.

It asked: 'Will other members of the Eurozone accept them? If not anyone holding Greek Euros may find themselves out of pocket.'

‘Greek euro notes,’ I hear you cry. ‘But surely the whole point – of this euro experiment was that everybody has exactly the same money?’

And that is true. The euro is a common currency, entirely equal across all nations, and while it is printed in individual member countries, wherever your note comes from the design is exactly the same.

But while the Eurocrats would have you believe that each of those notes is absolutely equal, there is one tiny crucial difference that lets you see where they come from. That involves a little-known trick I learnt about a few years ago.

04 May 2012 5:06 PM

This picture is actually rather tragic - so desperate is Kew of Kensington in London to promote its £25 off summer dress offer (in early May) that its big sign almost totally obscures its window display.

The double-dip recession is clearly hitting hard, if the patrons of one of the wealthiest Hign Streets in the country need this kind of come-on to splash out on a new frock.

If you want to see the 'selected dresses' behind that massive sign, click here. (You're welcome for the plug, Kew.)